A couple years ago, I started seeing articles about how some companies were disappointed that they didn’t achieve breakthrough results after having implemented a balanced scorecard. The gist of the articles seemed to be that the positive impact was minimal, and they were disappointed. Perhaps the practitioners read the Kaplan/Norton books on achieving an execution premium and had expected more. To me, their focus was on the wrong things. A balanced scorecard is merely one of many tools, and certainly one that only works when it’s surrounded by the proper components of a complete strategy management system. The value of the complete system that Kaplan and Norton put forward includes the balanced scorecard but it’s more about the impact that a comprehensive system has. Of course measurement resides in the middle of that system, but it doesn’t create success on its own.
To support that notion, it’s interesting to note that Kaplan and Norton often start their case for the scorecard with information around leadership and management process, rather than talking about measurement. For instance, their research has for many years showed that:
– 5% of employees understand the strategy
– 25% of managers have incentives linked to the strategy
– 60% of organizations don’t link budget to strategy
– 85% of executive teams spent less than one hour/month discussing strategy
In this environment, who would expect anything different? Translating your strategy into a series of measures and consistently driving toward them is a key method for creating strategic progression, but what else is required?
BHAG: I come to this conclusion time and again. Without a compelling vision, a succinctly articulated potential future, you don’t have a burning platform for change. This leads us to the next component…
Leadership: You can’t talk strategy without talking about leadership. It’s a fact that your strategy won’t be any more powerful than the quality of your leadership. By leadership, I don’t mean authority or management… I mean real leadership. BHAGS require leaders with courage and confidence. Companies with real leaders are more likely to have compelling BHAGS.
Measures: Every measures drives a corresponding behavior, so think this through. Be flexible in your ability to change measures, for the right reasons, but do your best to ensure it translates strategy into desired outcomes.
Culture: It’s been said that culture trumps strategy, every time. And it’s true. Like leadership, you can’t talk strategy without talking about culture. Glossing over this in the hopes of “getting there faster” is a mistake. Can’t be done.
Strategic clarity: You can only get people to do things that you can describe. Engage in the hard work of being able to answer all of the hard questions you know people are thinking… and make it clear what, how, when, and why your direction is what it is.
Measurement is at the core of strategic management, but it’s not an island unto itself. When all of the components are integrated, there’s no telling what you could accomplish. The potential of your organization will skyrocket once you optimize your strategy management, and the components around it (BHAG, Leadership, Measures, Culture, Clarity) but rarely before. It’s worth the effort.